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Summary of Financial Results for the Fiscal Year Ended January 31, 2018

[Japanese Standards] (Consolidated)

March 5, 2018 Name of Listed Company: Pigeon Corporation (Stock code: 7956) Listings: First Section, Tokyo Stock Exchange Website: www.pigeon.co.jp Representative: Shigeru Yamashita (President and COO) Contact person: Tsutomu Matsunaga (Managing Officer, Corporate Planning & Administration Division)/Tel: +81-3-3661-4188 Scheduled Date of Annual General Shareholders’ Meeting: April 26, 2018 Scheduled Commencement Date of Dividend Payments: April 27, 2018 Scheduled Filing Date of Annual Securities Report: April 27, 2018 Preparation of Any Additional Explanatory Materials for Financial Results: None Holding of Any Briefing Session for Financial Results: Yes (For analysts and institutional investors)

1. Consolidated Business Performance for the Fiscal Year Ended January 31, 2018 (February 1, 2017 to January 31, 2018) (1) Consolidated Operating Results (cumulative)

(Millions of yen, rounded down, % figures denote year-on-year change)

Net Sales Operating Income Ordinary Income

Net Income Attributable to

Owners of Parent Millions of Yen % Millions of Yen % Millions of Yen % Millions of Yen %

FY ended January 31, 2018 102,563 8.4 19,412 21.2 20,129 22.3 14,515 30.5

FY ended January 31, 2017 94,640 2.6 16,015 10.3 16,462 9.2 11,118 9.0

(Note) Comprehensive income: FY ended January 31, 2018 ¥15,710 million (81.7%) FY ended January 31, 2017 ¥8,647 million (3.6%)

Net Income per Share (¥)

Diluted Net Income per Share (¥)

Return on Equity (%)

Total Assets/ Ordinary Income (%)

Operating Margin (%)

FY ended January 31, 2018 121.20 － 25.7 24.6 18.9

FY ended January 31, 2017 92.84 － 21.8 21.5 16.9

(Reference) Equity in earnings of affiliates: FY ended January 31, 2018 ¥54 million FY ended January 31, 2017 ¥25 million

(2) Consolidated Financial Position

Total Assets Net Assets Equity Ratio (%) Net Assets

per Share (¥)

FY ended January 31, 2018 84,467 62,812 71.9 506.79

FY ended January 31, 2017 78,889 53,736 66.4 437.43

(Reference) Shareholders’ Equity: FY ended January 31, 2018 ¥60,693 million FY ended January 31, 2017 ¥52,387 million

(3) Cash Flows

Cash Flows from Operating Activities

Cash Flows from Investing Activities

Cash Flows from Financing Activities

Cash and Cash Equivalents at Year-End

FY ended January 31, 2018 17,094 (3,586) (12,812) 31,346

FY ended January 31, 2017 14,810 (1,854) (6,223) 30,052

2. Cash Dividends Annual Dividend (¥) Total

Dividends Paid (full

year) (¥ mil)

Consolidated Payout Ratio

(%)

Dividends on Consolidated Net Assets

(%)

1Q-end 2Q-end 3Q-end Year-end Total

FY ended January 31, 2017 － 25.00 － 28.00 53.00 6,347 57.1 12.5

FY ended January 31, 2018 － 31.00 － 35.00 66.00 7,904 54.5 14.0

FY ending January 31, 2019 (Forecast)

－ 34.00 － 34.00 68.00 －

3. Consolidated Business Performance Forecasts for the Fiscal Year Ending January 31, 2019 (February 1, 2018 to January 31, 2019)

(% figures denote year-on-year change from the previous term)

Net Sales Operating Income Ordinary Income Net Income

Attributable to Owners of Parent

Net Income per Share

Millions of Yen % Millions of Yen % Millions of Yen % Millions of Yen % Yen

Full year 107,000 4.3 20,400 5.1 20,400 1.3 14,100 (2.9) 117.73 Notes (1) Changes in major subsidiaries (or changes in specific subsidiaries that affect the scope of consolidation) during the

period under review: None New: － (Company name: － ), Excluded: － (Company name: － )

(2) Changes in accounting policies, changes in accounting-based estimates, and restatements 1) Changes in accounting policies associated with revision of accounting standards: None 2) Changes in accounting policies other than the above 1): None 3) Changes in accounting-based estimates: None 4) Restatements: None

(3) Number of outstanding shares (common stock)

1) Number of shares outstanding at the period-end (including treasury stock) FY ended January 31, 2018: 121,653,486 shares FY ended January 31, 2017: 121,653,486 shares

2) Amount of treasury stock at the period-end FY ended January 31, 2018: 1,892,329 shares FY ended January 31, 2017: 1,891,943 shares

3) Number of average shares outstanding during the period FY ended January 31, 2018: 119,761,277 shares FY ended January 31, 2017: 119,761,718 shares

* This summary of financial results is exempt from audit procedures. * Cautionary Statement regarding Performance Forecasts The forecasts and future projections stated in this report have been prepared on the basis of the information and assumption that shall be reasonable as of the date of announcement of this summary information, and the forecasts and future projections stated in this report are in no way intended as a promise of achievement as a company. In addition, the actual results could differ significantly from forecast figures depending on a variety of factors. See the section “(4) Future Directions” in “1. Overview of Management Results and Related Matters” on page 5 regarding conditions which are preconditions for business performance forecasts and cautions for using the business performance forecast.

Pigeon Corporation (7956) Summary of Financial Results for the Fiscal Year Ended January 2018

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Table of Contents of the Appendix 1. Overview of Management Results and Related Matters .................................................................. 2

(1) Overview of Management Results for the Term Under Review ................................................. 2 (2) Overview of Financial Position for the Term Under Review ..................................................... 4 (3) Overview of Cash Flows for the Term Under Review ................................................................ 5 (4) Future Directions ......................................................................................................................... 5 (5) Income Appropriation Policy and Dividends for the Term Under Review and Next Term ....... 5

2. Management Policies ....................................................................................................................... 6 (1) Basic Policies ............................................................................................................................. .6 (2) Performance Targets................................................................................................................... .6 (3) Medium-Term Management Strategies ....................................................................................... 6 (4) Issues to Address ......................................................................................................................... 7

3. Basic Approach for the Selection of Accounting Standards ............................................................ 7 4. Consolidated Financial Statements and Main Notes ........................................................................ 8

(1) Consolidated Balance Sheets....................................................................................................... 8 (2) Consolidated Statement of Income and Consolidated Statement of Comprehensive Income ........... 10

Consolidated Statement of Income ............................................................................................ 10 Consolidated Statement of Comprehensive Income .................................................................. 11

(3) Statement of Changes in Consolidated Shareholders’ Equity ................................................... 12 (4) Consolidated Statements of Cash Flows ................................................................................... 14 (5) Notes on Consolidated Financial Statements ............................................................................ 16 (Notes Regarding Going Concern Assumptions)...................................................................... 16 (Segment Information) .............................................................................................................. 16 (Per Share Information) ............................................................................................................ 20

(Material Subsequent Events) ................................................................................................... 20


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1. Overview of Management Results and Related Matters

(1) Overview of Management Results for the Term Under Review 1) Performance Overview During this consolidated accounting year (February 1, 2017 to January 31, 2018), Japan’s economy continued to recover at a gradual pace as a whole, thanks to an increase in corporate earnings and enhancement in the employment environment. In the global economy, in addition to the European and U.S. economies continuing to recover at a gradual pace, the Chinese economy also picked up steadily. On the other hand, a latent sense of uncertainty remained due to geopolitical risks, etc. Amid such economic circumstances, the Group developed the sixth medium-term business plan (for the period between the fiscal year ending January 2018 and the fiscal year ending January 2020), under the slogan of “Building our dreams into the future – by creating a bridge towards the Global Number One manufacturer of baby products –,” and has made efforts toward our further growth in the first year of this plan. In addition, we have set the following three basic strategies that would help us to expand the Group's business and improve its management quality.

1) Based on the Pigeon Way, create and implement all kinds of measures to achieve the goal of becoming ‘an indispensable company’ for the society and make our Vision “to be the baby product manufacturer most trusted by the world’s babies and families, i.e. ‘Global Number One’” come true.

2) A further increase in corporate value will be pursued through improvement in profitability and efficiency of the business, and maximization of cash flows. The organizational structure, management system and governance system will also be put in place and reinforced to ensure sustainable growth from a medium to long-term perspective.

3) During the three years of the sixth medium-term business plan, invest management resources giving priority to the key products and carry out strategic investments, laying solid foundations for the double-digit growth of Pigeon Group in the future.

During the consolidated period under review, we implemented strategies for each of our business and function on the basis of the above business policies. As the result, net sales amounted to ¥102,563 million (up 8.4% YOY), as supported by sales increases mainly in Japan and China. Regarding earnings, operating income rose to ¥19,412 million (up 21.2% YOY) thanks to a reduction of approximately 2.1 percentage points in the sales cost ratio from the previous term. Ordinary income recorded ¥20,129 million (up 22.3% YOY), and net income attributable to owners of parent also increased to ¥14,515 million (up 30.5% YOY). The main exchange rates used in the preparation of this consolidated period’s financial statements for the Company’s overseas consolidated subsidiaries (revenues and expenses) are as follows: ・1US$: 112.16 yen (108.77 yen) ・1 CNY: 16.62 yen (16.35 yen) Note: Figures in parentheses represent the exchange rate in the same period of the previous fiscal year. 2) Segment Review Our Group has a total of five reporting segments identified as: “Domestic Baby & Mother Care Business,” “Child Care Service Business,” “Health & Elder Care Business,” “Overseas Business,” and “China Business.” Each segment is outlined below. Please take note that in order to explain the profit status of each segment in a more detailed manner, we decided to record expenses in non-allocable operating expenses associated with the Research and Development Department, which had been included in the Adjustment section so far, in the segment profit of each reporting segment starting from the consolidated fiscal year under review.


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In addition, we have made year-over-year comparisons by converting the figures in the same period of the last year into the figures calculated in accordance with the new calculation method after the above revision. Domestic Baby & Mother Care Business Net sales of the segment amounted to ¥33,841 million (up 6.3% YOY). Segment profit increased to ¥5,928 million (up 23.0% YOY). Inbound demand continued to grow, driven by rising numbers of visitors to Japan. Responding to this demand, in February the Group launched its first hand-made ice cream product, “Baby Petit Ice.” In June the Group launched the new version of “Runfee,” single-tire baby stroller series that has earned high customer satisfaction. Later that summer, in August Pigeon launched “Bonyu Pad Fit Up® Saratto Chokyushu,” a breast pad with improved absorbency and leak resistance. In December Pigeon launched “Bonyu Jikkan® Nursing Bottle My Precious,” which won the Good Design Award for FY2017 and has enjoyed steadily rising sales and market share since then. In baby strollers as well, a key category for Pigeon, the Group’s market share continued to grow briskly. Moreover, during this fiscal year, we have held a number of events planned as a part of our direct communications program such as our “Premama Class” for women expecting to give birth in the near future and a seminar about breastfeeding while parenting for health care professionals, organized 32 times. A total of approximately 3,000 people have participated. On "Pigeon Info," a website that supports women during pregnancy, in childbirth, and in raising children, we are continuing to improve the in content so that users can use the site in a more convenient manner. Child Care Service Business Net sales of the segment amounted to ¥7,541 million (up 2.0% YOY). Segment profit increased to ¥218 million (up 3.6% YOY). During the consolidated fiscal year under review, we have launched four in-company child-care facilities, which we are currently operating while striving to improve the service quality. Health & Elder Care Business Net sales of the segment amounted to ¥7,058 million (up 2.3% YOY). Segment profit increased to ¥468 million (up 5.0% YOY). We will continue to focus on further strengthening our sales activities toward retail stores and nursing care facilities, and will ensure that the quality of our nursing care services is improved. Overseas Business Net sales of the segment amounted to ¥25,427 million (up 10.3% YOY). Segment profit also increased to ¥5,841 million (up 20.1% YOY), thanks to the improvement of gross profit margin, as well as effective use of selling, general and administrative expenses. In North America and Europe, where we operate mainly through Lansinoh Laboratories, Inc., a consolidated subsidiary, sales of breastfeeding-related products grew at a spritely pace. These products include flagship products such as nipple care cream, breast pumps and milk bags. Sales in North America expanded through a new sales route, DME Channel, while sales in China continued their trend of solid growth through Lansinoh Laboratories Shanghai, an initiative of the previous year. In India, a key market for the Group, Pigeon enjoyed growth in both sales and earnings, thanks to hard work on initiatives to expand distribution outlets. The Group will continue to make efforts to develop operations through activities on a wide range of fronts. China Business Net sales in this segment increased to ¥34,494 million (up 13.0% YOY), because sales of core products such as nursing bottles and nipples and skincare products remained strong. Segment profit increased to ¥9,716 million (up 16.3% YOY). In May we launched a line of nursing bottles, cups, pacifiers and other baby products decorated


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with Disney characters, which enjoyed robust growth. In addition, we will continue to strengthen our activities in the E-commerce market and sales focused on its flagship store, both of which are expected to grow further in the future; we will utilize social networking services further for the invigoration of direct communication with consumers, and will also continue to reinforce sales promotions at stores as well as offline sales activities aimed at hospitals and maternity clinics, in order to increase contact points with customers and expand our operations. Other Businesses Net sales of the segment amounted to ¥1,289 million (up 1.3% YOY), while the segment profit decreased to ¥126 million (down 22.2% YOY). (2) Overview of Financial Position for the Term Under Review 1) Assets As of January 31, 2018, total assets amounted to ¥84,467 million, up ¥5,578 million from the previous consolidated fiscal year ended January 31, 2017. Current assets had an increase of ¥2,933 million, and fixed assets had an increase of ¥2,644 million. Current assets increased mainly due to increases in cash and deposits of ¥1,294 million and in merchandise and finished goods of ¥731 million. Fixed assets increased mainly due to increases in goodwill of ¥1,219 million and in software in progress of ¥1,001 million. 2) Liabilities As of January 31, 2018, total liabilities amounted to ¥21,655 million, down ¥3,497 million from the previous consolidated fiscal year ended January 31, 2017. Current liabilities had a decrease of ¥3,708 million, while fixed liabilities had an increase of ¥211 million. Current liabilities decreased mainly due to a decrease in current portion of long-term loans payable of ¥5,000 million, despite an increase in accounts payable of ¥664 million. Fixed liabilities increased mainly due to increases in deferred tax liabilities of ¥249 million and in net defined benefit liability of ¥159 million, despite a decrease in provision for special extra retirement payments of ¥208 million. 3) Net Assets As of January 31, 2018, total net assets amounted to ¥62,812 million, up ¥9,075 million from the previous consolidated fiscal year ended January 31, 2017. This increase resulted mainly from increases in retained earnings of ¥7,449 million and in foreign currency translation adjustment of ¥861 million. 4) Cash Flows As of January 31, 2018, cash and cash equivalents (hereinafter referred to as “net cash”) amounted to ¥31,346 million, up ¥1,294 million from a year earlier. Cash Flows from Operating Activities Net cash provided by operating activities amounted to ¥17,094 million, up from ¥14,810 million of the previous year. This increase is mainly due to ¥20,916 million in income before income taxes and ¥2,444 million in depreciation. Contrasting factors included a ¥761 million increase in inventories and ¥5,868 million in income taxes paid. Cash Flows from Investing Activities Net cash used in investing activities totaled ¥3,586 million, up from ¥1,854 million of the previous year. This is mainly due to ¥2,199 million in purchases of tangible fixed assets and ¥1,055 million in purchase of intangible assets. Cash Flows from Financing Activities Net cash used in financing activities was ¥12,812 million, up from ¥6,223 million of the previous


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year. This decrease is mainly due to ¥5,000 million in repayments of long-term loans payable and ¥7,066 million in payment of cash dividends. (3) Overview of Cash Flows for the Term Under Review Cash flow indicators of the Group are shown below.

FY2016 FY2017 FY2018

Equity Ratio (%) 67.0 66.4 71.9

Equity Ratio based on Market Price (%) 411.7 464.5 604.0

Debt Repayment Term (years) 0.5 0.4 0.0

Interest Coverage Ratio (times) 108.7 335.2 1,523.8 - Equity ratio: Total shareholders’ equity ÷ Total assets - Equity ratio based on market price: Market value of total stock ÷ Total assets - Debt repayment term: Interest-bearing debt ÷ Operating cash flows - Interest coverage ratio: Operating cash flows ÷ Interest paid Notes:

1. Each index is calculated based on consolidated financial figures. 2. Market value of total stock is calculated by multiplying the stock price (closing price at the end of the term) by the number of shares

outstanding at the end of the term (after deduction of treasury stock). 3. Operating cash flow figures are taken from the Cash Flows from Operating Activities section of the Consolidated Statements of Cash Flows. 4. Interest-bearing debt refers to all debt that incurs interest (listed in Consolidated Balance Sheets). 5. For interest paid, interest expenses (listed in Consolidated Statements of Cash Flows) are used.

(4) Future Directions The group deploys operation to fulfill its mission to bring joy, happiness and inspiration to babies and families around the world by providing them with products and services that embody its corporate philosophy “love.” Guided by this commitment, the Group has set in its medium to long-term corporate vision “to be the baby product manufacturer most trusted by the world’s babies and families i.e. “Global Number One.” For the Sixth Medium-Term Business Plan (for the period between the fiscal year ending January 2018 and the fiscal year ending January 2020), the Group has adopted the slogan, “Building our dreams into the future – by creating a bridge towards the Global Number One manufacturer of baby products –.” This medium-term business plan incorporates three basic strategies as follow, to guide the Group's efforts to expand its business and improve its management quality.




(5) Income Appropriation Policy and Dividends for the Term Under Review and Next Term The Pigeon Group regards the return of income to shareholders as an important management priority. Our policy is to actively return income to shareholders through appropriation of retained earnings and other means, while reinforcing our financial position based on considerations of medium-term changes in business conditions and the Group’s business strategies. In addition to strengthening our financial position, we effectively use retained earnings in a number of ways to fortify our operational base and improve future Group earnings. These include investing in new businesses for further growth and research and development, as well as investing in production


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facilities to raise production capacity, reduce costs, and enhance product quality. With respect to targets of shareholder return, under the Sixth Medium-Term Business Plan announced in March 2017, we aim to increase dividends every fiscal year compared to previous year. We are also targeting a consolidated total shareholder return of 55%. To this end, we have sought to further strengthen and upgrade measures for returning profits to all shareholders. The distribution of dividends in the period under review reflects the above policies and targets. The Group distributed an interim dividend of ¥31 per share (ordinary dividend of ¥31). For the year-end dividend, the Group forecasts a dividend of ¥35 per share (ordinary dividend of ¥35). This amount is ¥4 higher than the dividend forecast of ¥31 announced on September 4, 2017, due to better-than-expected operating results. As a result, the annual dividend for the term under review will total ¥66 per share (ordinary dividend of ¥66), a per share increase by ¥13 from the previous year. 2. Management Policies

(1) Basic Policies The group deploys operation to fulfill its mission to bring joy, happiness and inspiration to babies and families around the world by providing them with products and services that embody its corporate philosophy “love.” Guided by this commitment, the Group has set in its medium to long-term corporate vision “to be the baby product manufacturer most trusted by the world’s babies and families i.e. “Global Number One.” (2) Performance Targets For the "Sixth Medium-Term Business Plan (for the period between fiscal year ending January 2018 and fiscal year ending January 2020)," our Group has put up the following slogan, "Building our dreams into the future – by creating a bridge towards the Global Number One manufacturer of baby products –." By steadily implementing a range of measures in line with the medium term goals stated in the following section, the level of achievements aimed at for the term ending January, 2020, which is the last fiscal year of the Plan, is net sales of ¥110 billion, operating income of ¥20 billion, and net income attributable to owners of parent of ¥13,800 million. Moreover, in order to ensure yet further improvement of profitability and efficiency of capital, the Group shall deem PVA (Pigeon Value Added), return on invested capital (ROIC), etc. as important management indices, and strive to improve each of them even more. (3) Medium-Term Management Strategies For the "Sixth Medium-Term Business Plan (for the period between fiscal year ending January 2018 and fiscal year ending January 2020)," we have set the following three basic strategies that shall help us to expand the Group's business and improve its management quality.





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(4) Issues to Address The Group expects uncertainty to linger in the economic environment in which it operates, due to concerns over the slowdown in business growth of China and uncertainties in the global economy centering on Europe and the U.S., but at the same time, consumption trends in China and Japan are quite steady and there is also much to be expected from economic growth of Asian countries and other newly emerging countries around the world. Amid such circumstances, during the "Sixth Medium-Term Business Plan (for the period between fiscal year ending January 2018 and fiscal year ending January 2020)," the Group shall steadily implement a range of measures prescribed in the newly established "Strategy for Important Categories" and individual strategies of each segment. In particular, the Group is focusing on China and Overseas operations, which are positioned as a continuing growth field. In this arena the Group will expand and deepen its presence in existing markets, most notably in China and North America. In addition, we shall select a number of overseas markets of importance to us already, or those we want to expand our presence in in the future, and make strong efforts to establish firm business foundations in such areas in Asia, Africa, etc., which can play important roles for the future growth of the Group. Further, with respect to the Group’s Business Continuity Plan, we will further enhance the global risk management structure that has already been put in place. Moreover, in order to further enhance the soundness and transparency of management going forward, a through enforcement of internal control systems, including the compliance organization will be made for fortifying corporate governance. 3. Basic Approach for the Selection of Accounting Standards The consolidated financial statements of our Group are prepared based on Japanese standards. In the future, we will have to prepare these statements based on the International Financial Reporting Standards (IFRS) for the purpose of improving global comparability of financial information, and we will continue to consider them, including the application period.


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4. Consolidated Financial Statements and Main Notes (1) Consolidated Balance Sheets

(Millions of yen)

At January 31, 2017 At January 31, 2018

ASSETS I. Current Assets:

Cash and deposits 30,052 31,346 Notes and accounts receivable - trade 16,103 16,440 Merchandise and finished goods 5,328 6,059 Work in process 261 293 Raw materials and supplies 2,013 2,359 Deferred tax assets - current 665 739 Receivables 253 278 Other current assets 592 880 Allowance for doubtful accounts (26) (221) Total Current Assets 55,244 58,178

II. Fixed Assets: 1. Tangible Fixed Assets:

Buildings and structures 15,363 16,010 Accumulated depreciation (8,373) (8,904) Buildings and structures, net 6,989 7,105

Machinery, equipment and vehicles 15,231 17,087 Accumulated depreciation (9,505) (11,184) Machinery, equipment and vehicles, net 5,726 5,902

Tools, furniture and fixtures 6,250 6,517 Accumulated depreciation and accumulated impairment loss

(4,613) (4,984)

Tools, furniture and fixtures, net 1,637 1,533 Land 5,683 5,878 Construction in progress 226 695 Total Tangible Fixed Assets 20,263 21,116

2. Intangible Fixed Assets: Goodwill 51 1,271 Software 502 456 Software in progress － 1,001 Other intangible fixed assets 552 578 Total Intangible Fixed Assets 1,106 3,307

3. Investments and Other Assets: Investment securities 1,481 1,020 Bankruptcy claims 18 10 Deferred tax assets 262 217 Insurance reserve 176 177 Other 354 452 Allowance for doubtful accounts (19) (12) Total Investments and Other Assets 2,273 1,865

Total Fixed Assets 23,644 26,289 Total Assets 78,889 84,467


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(Millions of yen)

At January 31, 2017 At January 31, 2018

LIABILITIES I. Current Liabilities:

Notes and accounts payable - trade 4,857 5,194 Electronically recorded obligations - operating 1,693 1,797 Short-term borrowings 699 － Current portion of long-term loans payable 5,000 － Accounts payable 2,477 3,141 Income taxes payable 2,324 2,578 Accrued bonuses to employees 929 1,035 Reversal of reserve for returned products 73 51 Provision for loss on litigation 37 － Provision for special extra retirement payments － 208 Other current liabilities 3,289 3,666 Total Current Liabilities 21,381 17,673

II. Fixed Liabilities: Deferred tax liabilities 2,675 2,924 Net defined benefit liability 131 290 Provision for directors and corporate auditors’ retirement benefits

445 516

Provision for special extra retirement payments 208 － Other fixed liabilities 310 250 Total Fixed Liabilities 3,770 3,982 Total Liabilities 25,152 21,655

NET ASSETS I. Shareholders’ Equity:

Capital stock 5,199 5,199 Capital surplus 5,179 5,179 Retained earnings 42,280 49,729 Treasury stock (948) (949) Total Shareholders’ Equity 51,711 59,158

II. Accumulated Other Comprehensive Income: Valuation difference on available-for-sale securities 47 44 Foreign currency translation adjustment 628 1,490 Total Accumulated Other Comprehensive Income 676 1,534

III. Non-controlling Interests 1,349 2,119 Total Net Assets 53,736 62,812

Total Liabilities and Net Assets 78,889 84,467


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(2) Consolidated Statement of Income and Consolidated Statement of Comprehensive Income (Consolidated Statement of Income)

(Millions of yen)

Year Ended

January 31, 2017 Year Ended

January 31, 2017 I. Net Sales 94,640 102,563 II. Cost of Sales 49,941 52,010

Gross profit 44,698 50,552 Reversal of reserve for returned products 45 70 Transfer to reserve for returned products 55 50 Adjusted gross profit 44,688 50,572

III. Selling, General and Administrative Expenses 28,673 31,159 Operating Income 16,015 19,412

IV. Non-operating Income: Interest income 133 187 Dividend income 18 19 Share of profit of entities accounted for using equity method

25 54

Subsidy income 556 812 Other non-operating income 212 188 Total Non-operating Income 945 1,263

V. Non-operating Expenses: Interest expenses 42 11 Sales discounts 366 418 Foreign exchange losses 47 75 Other non-operating expenses 41 42 Total Non-operating Expenses 498 547 Ordinary Income 16,462 20,129

VI. Extraordinary Income: Gain on sales of fixed assets 122 115 Gain on sales of investment securities － 95 Gain on step acquisitions － 848 Total Extraordinary Income 122 1,058

VII. Extraordinary Loss: Loss on sales of fixed assets 3 60 Loss on disposal of fixed assets 25 22 Recall-related loss － 187 Loss on liquidation of subsidiaries and associates 46 － Loss on liquidation of business 35 － Special extra retirement payments 239 － Total Extraordinary Loss 350 271

Income before Income Taxes 16,234 20,916 Income taxes - current 5,165 5,931 Income taxes - deferred (273) 225 Total Corporate Income Tax 4,891 6,157 Net Income 11,342 14,759 Net Income Attributable to Non-controlling Interests 224 244 Net Income Attributable to Owners of Parent 11,118 14,515


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(Consolidated Statement of Comprehensive Income) (Millions of yen)

Year Ended


January 31, 2018 Net Income 11,342 14,759 Other Comprehensive income

Valuation difference on available-for-sale securities 14 (3) Foreign currency translation adjustment (2,709) 953 Total Other Comprehensive Incomes (2,694) 950

Comprehensive Income 8,647 15,710 (Breakdown)

Comprehensive income on parent company 8,450 15,373 Comprehensive income on non-controlling interests 197 336


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(3) Statement of Changes in Consolidated Shareholders’ Equity Fiscal Year Ended January 31, 2017

(Millions of yen) Shareholders’ equity

Common stock

Capital surplus

Retained earnings

Treasury stock

Total shareholders’

equity Balance at the beginning of the period

5,199 5,180 36,790 (947) 46,223

Changes during the period Dividends from surplus (5,628) (5,628) Change in treasury shares of parent arising from transactions with non-controlling shareholders

(1) (1)

Net income attributable to owners of parent

11,118 11,118

Acquisition of treasury stock

(1) (1)

Changes in items other than shareholders’ equity (net)

Total changes during the period

－ (1) 5,489 (1) 5,487

Balance at the end of current period

5,199 5,179 42,280 (948) 51,711

Accumulated other comprehensive income

Non- controlling

Interests

Total net assets

Valuation difference on available-for- sale securities

Foreign currency

translation adjustment

Total accumulated

other comprehensive

income Balance at the beginning of the period

32 3,311 3,344 1,225 50,792

Changes during the period Dividends from surplus (5,628) Change in treasury shares of parent arising from transactions with non-controlling shareholders

(5) (6)


11,118


(1)


14 (2,682) (2,668) 129 (2,538)


14 (2,682) (2,668) 124 2,944


47 628 676 1,349 53,736


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Fiscal Year Ended January 31, 2018 (Millions of yen)

Shareholders’ equity

Common stock

Capital surplus

Retained earnings

Treasury stock

Total shareholders’

equity Balance at the beginning of the period

5,199 5,179 42,280 (948) 51,711

Changes during the period Dividends from surplus (7,065) (7,065) Change in treasury shares of parent arising from transactions with non-controlling shareholders

－


14,515 14,515


(1) (1)



－－ 7,449 (1) 7,447


5,199 5,179 49,729 (949) 59,158

Accumulated other comprehensive income

Non- controlling

Interests

Total net assets

Valuation difference on available-for- sale securities

Foreign currency

translation adjustment

Total accumulated

other comprehensive

income Balance at the beginning of the period

47 628 676 1,349 53,736

Changes during the period Dividends from surplus (7,065) Change in treasury shares of parent arising from transactions with non-controlling shareholders

－


14,515


(1)


(3) 861 858 769 1,627


(3) 861 858 769 9,075


44 1,490 1,534 2,119 62,812


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(4) Consolidated Statements of Cash Flows (Millions of yen)

Year Ended January 31, 2017

Year Ended January 31, 2018

I. Cash Flows from Operating Activities: Income before income taxes 16,234 20,916 Depreciation 2,259 2,444 Amortization of goodwill 97 6 Increase (decrease) in allowance for doubtful accounts (14) 186 Increase (decrease) in accrued bonuses to employees 46 110 Increase (decrease) in net defined benefit liability (302) 68 Increase (decrease) in provision for directors and corporate auditors’ retirement benefits 35 70

Increase (decrease) in provision for special extra retirement payments 208 －

Interest and dividend income (151) (207) Share of (gain) loss of entities accounted for using equity method (25) (54)

Interest expenses 42 11 Foreign exchange loss (gain) 77 187 Loss (gain) on sales of property (118) (54) Loss on disposal of property 25 22 Gain on step acquisitions － (848) Decrease (increase) in notes and accounts receivable - trade (2,927) 376

Decrease (increase) in inventories 835 (761) Increase (decrease) in notes and accounts payable - trade 1,482 115 Loss (gain) on sales of investment securities － (95) Increase (decrease) in accounts payable 538 345 Increase (decrease) in accrued consumption taxes 811 34 Decrease (increase) in claims provable in bankruptcy/rehabilitation 8 8

Other (209) (124) Subtotal 18,954 22,760

Interest and dividend income received 194 213 Interest expenses paid (44) (11) Income taxes paid (4,295) (5,868)

Net Cash Provided by (Used in) Operating Activities 14,810 17,094 II. Cash Flows from Investing Activities:

Purchase of tangible fixed assets (2,424) (2,199) Proceeds from sales of tangible fixed assets 769 162 Purchase of intangible assets (210) (1,055) Purchase of investment securities (1) (1) Proceeds from sales of investment securities － 198 Purchase of insurance funds (165) (0) Proceeds from cancellation of insurance funds 165 － Payments of loans receivable (13) (1) Collection of loan receivable 9 8 Purchase of shares of subsidiaries resulting in change in scope of consolidation － (587)

Payment for lease deposits (20) (131) Collection of lease deposits 10 29 Other 29 (7)

Net Cash Provided by (Used in) Investing Activities (1,854) (3,586)


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(Millions of yen)

Year Ended


January 31, 2018 III. Cash Flows from Financing Activities:

Increase in short-term loans payable 485 － Decrease in short-term loans payable (179) (673) Repayments of long-term loans payable (837) (5,000) Payment of cash dividends (5,622) (7,066) Dividends paid to non-controlling interests (67) (70) Purchase of treasury stock (1) (1) Other (0) －

Net Cash Provided by (Used in) Financing Activities (6,223) (12,812) IV. Effect of Exchange Rate Changes on Cash and Cash

Equivalents (891) 599

V. Net Increase (Decrease) in Cash and Cash Equivalents 5,840 1,294 VI. Cash and Cash Equivalents at Beginning of Period 24,297 30,052 VII. Increase (Decrease) in Cash and Cash Equivalents

Resulting from Change of Scope of Consolidation (86) －

VIII. Cash and Cash Equivalents at End of Period 30,052 31,346


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(5) Notes on Consolidated Financial Statements (Notes Regarding Going Concern Assumptions)

Not applicable. (Segment Information) 1. Summary of Reporting Segments In respect of the Company’s reporting segments, these are, of the constituent units in the Group, those for which separate financial information are available and those that are the subject of regular examination by the board of directors to make decisions on management resource allocation and assessment of performance. The Company separates sales of principally nursing products into domestic and overseas sales and, in addition, is engaged in providing sales and services relating to health care and nursing care, services relating to supporting childcare. The Company has established business headquarters along products, services, and regions. For this purpose, the Company is configured by segments by products and services and by regions. Our Group has a total of five reporting segments identified as: “Domestic Baby & Mother Care Business,” “Child Care Service Business,” “Health & Elder Care Business,” “Overseas Business,” and “China Business.” The Company’s reporting segment types are as follows. (i) Domestic Baby & Mother Care Business It is engaged in the manufacture and sales of childcare products and feminine products in Japan. (Principal Products) Breastfeeding-related products, weaning-related products, skincare products,

wet tissues, baby foods, baby outing products, feminine care products (supplements, maternity products), other

(ii) Child Care Service Business It is engaged in provision of child care services in Japan. (Principal Services) Operation and contracting of nursery facilities, operation of preschool

educational facilities, babysitter dispatch services, other (iii) Health & Elder Care Business It is engaged in the manufacture and sales of health care products and nursing care products as well as provision of nursing care services in Japan. (Principal Products) Incontinence protection products, skincare products, wet tissues, wheel chairs,

products for nursing care facilities, nursing care support services, other (iv) Overseas Business It is engaged in the manufacture and sales of child care products and feminine products for all countries in the world except China, South Korea, Hong Kong, Taiwan, Russia, and some other countries. (v) China Business It is engaged in the manufacture and sales of child care products and feminine products in China, South Korea, Hong Kong, Taiwan, Russia, and some other countries. 2. Calculation Method for the Values in Segmental Sales, Profits or Losses, Assets and Other Items The methodology adopted in calculating the segmental sales, profits or losses, assets and other items is generally the same as in “Basis for Preparing Consolidated Financial Statements”. In order to understand our profit status of each segment in a more detailed manner, we decided to report expenses in non-allocable operating expenses associated with the Research and Development


17

Department, which had been included in the Adjustment section so far, in the segment profit of each reporting segment starting from the consolidated fiscal year under review. The segment information for the previous consolidated fiscal year is adjusted in accordance with the new segment profit calculation method after the above revision.


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3. Information Regarding Net Sales, Profit (Loss), Assets and Other Items in Each Reporting Segment Fiscal Year Ended January 31, 2017

(Millions of yen)

Reporting Segment Other

Businesses (Note) 1

Total

Adjustments (Note) 2 (Note) 3 (Note) 4 (Note) 5

Amount Accounted on Consolidated

Financial Statements

(Note) 6

Domestic Baby &

Mother Care Business

Child Care Service

Business

Health & Elder Care Business

Overseas Business

China Business

Subtotal

Net Sales Net sales to external customers

31,823 7,393 6,901 16,932 30,315 93,366 1,273 94,640 － 94,640

Internal sale or exchange between segments

－－－ 6,119 217 6,337 － 6,337 (6,337) －

Total 31,823 7,393 6,901 23,051 30,533 99,704 1,273 100,977 (6,337) 94,640

Segment Profit 4,818 211 445 4,861 8,355 18,692 162 18,855 (2,840) 16,015

Segment Assets 12,285 1,318 3,243 19,507 25,146 61,501 1,158 62,659 16,229 78,889

Other Items

Depreciation (Note) 7

525 23 86 712 688 2,036 41 2,078 181 2,259

Amortization of Goodwill

－－－ 97 － 97 － 97 － 97

Increase in Tangible Fixed Assets and Intangible Fixed Assets (Note) 8

471 12 62 1,541 234 2,321 20 2,341 157 2,498

(Notes) 1. “Other” represents a business segment not included in the reporting segments and principally covers manufacture and sales by

manufacturing subsidiaries of the company for sales outside the Group. 2. The negative amount of ¥2,840 million from adjustments in segment profit includes ¥101 million in elimination of intersegment transactions,

and negative ¥2,941 million in non-allocable operating expenses. Non-allocable operating expenses are mainly administrative costs of our Group.

3. The amount of ¥16,229 million in adjustments in segment assets includes negative ¥2,709 million in eliminations of inter-segment transactions, and ¥18,939 million in the entire company assets consisting principally of investments of surplus of the parent company (Cash and Deposits), long term investment assets (Investment Securities and the Like) and assets relating to the administrative area.

4 Depreciation adjustments are depreciations relating the entire company assets. 5 Adjustments of increase in tangible fixed assets and intangible assets relate to the entire company assets. 6. Segment profit has been adjusted with the operating income in the consolidated financial statements 7. Amortization relating to long term pre-paid expenses are included in the depreciation. 8. Increases in tangible fixed assets and intangible fixed assets include increases in long term pre-paid expenses.


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Fiscal Year Ended January 31, 2018 (Millions of yen)

Reporting Segment Other

Businesses (Note) 1

Total

Adjustments (Note) 2 (Note) 3 (Note) 4 (Note) 5

Amount Accounted on Consolidated

Financial Statements

(Note) 6

Domestic Baby &

Mother Care Business

Child Care Service

Business

Health & Elder Care Business

Overseas Business

China Business

Subtotal

Net Sales Net sales to external customers

33,841 7,541 7,058 18,659 34,171 101,273 1,289 102,563 － 102,563

Internal sale or exchange between segments

－－－ 6,768 322 7,090 － 7,090 (7,090) －

Total 33,841 7,541 7,058 25,427 34,494 108,363 1,289 109,653 (7,090) 102,563

Segment Profit 5,928 218 468 5,841 9,716 22,173 126 22,299 (2,887) 19,412

Segment Assets 13,113 1,410 3,248 24,010 27,565 69,348 1,197 70,545 13,922 84,467

Other Items

Depreciation (Note) 7

558 25 92 817 708 2,202 44 2,246 198 2,444

Amortization of Goodwill

－－－ 6 － 6 － 6 － 6

Increase in Tangible Fixed Assets and Intangible Fixed Assets (Note) 8

933 80 94 833 443 2,385 65 2,451 1,094 3,546

(Notes) 1. “Other” represents a business segment not included in the reporting segments and principally covers manufacture and sales by

manufacturing subsidiaries of the company for sales outside the Group. 2. The negative amount of ¥2,887 million from adjustments in segment profit includes ¥4 million in elimination of intersegment transactions,

and negative ¥2,892 million in non-allocable operating expenses. Non-allocable operating expenses are mainly administrative costs of our Group.

3. The amount of ¥13,922 million in adjustments in segment assets includes negative ¥2,849 million in eliminations of inter-segment transactions, and ¥16,771 million in the entire company assets consisting principally of investments of surplus of the parent company (Cash and Deposits), long term investment assets (Investment Securities and the Like) and assets relating to the administrative area.

4 Depreciation adjustments are depreciations relating the entire company assets. 5 Adjustments of increase in tangible fixed assets and intangible assets relate to the entire company assets. 6. Segment profit has been adjusted with the operating income in the consolidated financial statements 7. Amortization relating to long term pre-paid expenses are included in the depreciation. 8. Increases in tangible fixed assets and intangible fixed assets include increases in long term pre-paid expenses.


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(Per Share Information)

Previous fiscal year (February 1, 2016 to January 31, 2017)

Current fiscal year (February 1, 2017 to January 31, 2018)

Net Assets per Share ¥437.43 ¥506.79 Net Income per Share ¥92.84 ¥121.20 (Notes) 1. With respect to Diluted Net Income per Share, there are no latent shares, thus, has not been disclosed.

2. The basis for the calculation of the Net Income per Share is as follows.

Previous fiscal year (February 1, 2016 to January 31, 2017)

Current fiscal year (February 1, 2017 to January 31, 2018)

Net Income Attributable to Owners of Parent (¥ millions)

11,118 14,515

Amount Not Attributable to Ordinary Shareholders (¥ millions)

－－

Net Income Attributable to Owners of Parent Relating to Ordinary Shares (¥ millions)

11,118 14,515

Average Number of Shares During the Term (shares)

119,761,718 119,761,277

(Material Subsequent Events) Not applicable.

summary of financial results for the ... - pigeon global · as the result, net sales amounted to...

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